2023 (8) TMI 678 - AT - Income Tax

Reopening of assessment - reason to believe - change of opinion - scrutiny of records reveal that the assessee has furnished no supporting evidence regarding genuineness of 9 sundry creditors - HELD THAT - As issue regarding sundry creditors remaining unverifiable was specifically enquired into during the course of original assessment proceedings. Therefore, in our considered view, the assessing officer cannot resort to the same issue and make additions to the total income on the very same ground/issue for consideration, which has been considered and enquired into detail during the course of original assessment proceedings and which formed the basis of framing of original assessment order. In the case of Kelvinator India Ltd. 2010 (1) TMI 11 - SUPREME COURT Hon ble Supreme Court has categorically held that change of opinion is an in-built test to check abuse of power by the Assessing Officer. Hence, for the purpose of re-opening of assessment, there has to be some fresh tangible material which was not available with the Assessing Officer at the time of original assessment proceedings. In absence of any such fresh tangible material, the re-opening cannot be resorted to since the same would amount to mere change of opinion . Further, the Supreme Court held that mere change of opinion cannot be per se reason to reopen the assessment proceedings which have already been concluded. Thus in the instant facts the re-assessment proceedings have been initiated on a mere change of opinion and hence the same are not liable to be sustained. Accordingly, we direct, that the re-assessment order having been passed on mere change of opinion is liable to be quashed.

Summary

Issues Involved:
1. Legality of the addition of Rs. 1,63,03,871/- on account of unexplained creditors.
2. Validity of the notice issued under Section 148 and the consequential reassessment order under Section 143(3) read with Section 147 of the Income Tax Act, 1961.

Summary:

1. Addition of Rs. 1,63,03,871/- on account of unexplained creditors:
The assessee contested the addition of Rs. 1,63,03,871/- made by the Assessing Officer (AO) for unexplained creditors. The AO had reason to believe that income had escaped assessment due to the failure of the assessee to provide details and evidence of the genuineness of sundry creditors. Despite the assessee's assertion that the income was assessed on an estimated basis under Section 44AD, the CIT(A) upheld the AO's addition, noting the assessee's failure to furnish books of accounts and evidence of the creditors' genuineness.

2. Validity of the notice issued under Section 148 and the reassessment order under Section 143(3) read with Section 147:
The assessee argued that the reassessment proceedings amounted to a "change of opinion" since the issue of sundry creditors was already discussed during the original assessment proceedings. The Tribunal observed that the AO had indeed raised the issue of unverifiable sundry creditors during the original assessment, and the assessment order was framed taking this into account. Citing the Supreme Court's decision in Kelvinator India Ltd., the Tribunal emphasized that "change of opinion" cannot justify reopening an assessment without fresh tangible material. The Tribunal also referred to the Delhi High Court's decision in Usha International Ltd., which held that reassessment is invalid if the AO had formed an opinion on the issue during the original assessment. Consequently, the Tribunal quashed the reassessment order, deeming it based on a "mere change of opinion."

Conclusion:
The Tribunal allowed the appeal, quashing the reassessment order as it was initiated on a "mere change of opinion," without any fresh tangible material. This decision reinforces the principle that reassessment cannot be based solely on a reconsideration of issues already examined during the original assessment.